How to Talk to Your Kids About Money

Growing up, we rarely talked about money in our home. In fact, other than trying to scam my younger sister out of her allowance by selling her my overpriced, hand-sewn American Girl doll clothes, I can’t recall the cost of things coming up in conversation much at all. I would hear the occasional, “No, you can’t have that; it’s too expensive,” from my mom when we were out shopping, but beyond that, we didn’t discuss the cold, hard numbers, a household budget, investment or how much anyone actually made each month.

I started to learn how to budget whenever I was babysitting at 12 and then getting my first job at 14, but there was no way that prepared me for getting married and dealing with very big monthly expenses. So I struggled.

On the other hand, my husband talks about money all the time and has no problems asking his friends how much money they make (which I still find incredibly inappropriate). So we try to find a balance with our kids so they don’t go off into the world feeling overwhelmed when they have to go to the bank. To help ease our 8-year-old into much bigger money conversations, we’ve developed a few strategies that are right on target with kids’ comprehension.

Encourage the questions

We’re currently getting ready to leave for summer vacation, which will undoubtedly be expensive, so we’ve been cutting back in other areas in preparation. So when my son was asking for ice cream after school, I explained that I’m getting ready to purchase our very expensive tickets to Universal Studios, so we’re cutting back on our daily expenses. He then asked how much the tickets cost, and I had that conversation with him because hiding the amount isn’t doing him any good.

Encouraging questions like these help them understand that activities and vacations don’t come without a price tag and just like he has to save up his allowance for a new skateboard, we have to save our money for things. It’s helped put things into perspective for him.

Show their investments

I feel like I’ve said to my son a thousand times that he can’t have something super-expensive at the store because it’s more important for us to put money toward his investments instead. He would huff and puff and finally stop begging. But then recently, it finally clicked that he really had no idea what I was talking about because it wasn’t money that he could see in his piggy bank. It wasn’t tangible enough for his 8-year-old mind to understand the concept of investments.

So I sat down with him recently and opened up the computer and physically showed him his account with his name on it, how much money was in there and what we’re contributing each month. He gets it now and asks to see his account grow each month as we discuss what he’ll use the money for someday. It’s given him a better understanding of the word “investment.”

Talk numbers, but not all of them

While I don’t share with my little guy how much money I make, I do talk numbers with him all the time. For instance, whenever we get the mail and have a bill in our mailbox, I’ll open it with him and show him what our gas or electric costs each month so that our stove works and we can turn the lights and electronics on. It helps break things down for him.

Allowance & chores are key

Obviously, my son is too young to get a job, but having a chore-and-rewards system at home has helped mimic what’s to come, but on his level of understanding. Having a set daily routine of expectations that must be met by him in order to get a certain amount of money has given him motivation to keep with it and feel really good about himself once he has enough money for something he’s been wanting.